• Kyodo, Jiji

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Toshiba Corp. is considering rejecting a buyout offer from British private equity firm CVC Capital Partners as the Japanese industrial conglomerate seeks to remain listed, sources close to the matter said Thursday.

Senior Toshiba officials have told the company's creditor banks that the electronics and infrastructure firm is opposed to CVC's buyout plan worth over ¥2 trillion, and have asked them not to provide funding to the private equity firm for the planned acquisition, the sources said.

Toshiba's potential rejection of the buyout plan raises the possibility of a hostile takeover bid by CVC, which is already soliciting other investors in Japan to join the move and aims to submit a more detailed proposal soon to acquire the Japanese firm.

Osamu Nagayama, chairman of the Toshiba board, is opposed to CVC's proposal that would make the Japanese firm private, and a Toshiba executive has told a major Japanese bank that the company will "absolutely" remain listed, the sources said.

Toshiba on Friday denied media reports that it plans to reject the acquisition offer.

"(The offer) was a preliminary and non-legally binding initial proposal that is impossible for Toshiba to evaluate," it said. "Toshiba's board will conduct a careful review once the initial proposal has been clarified, and at this point, nothing definite has been decided."

The revelation came after Nobuaki Kurumatani stepped down as Toshiba's president and CEO on Wednesday. The recent buyout proposal from CVC, Kurumatani's former employer, had apparently led some executives at Toshiba to see it as his attempt to defend himself. Nagayama is believed to be one of the board members who raised questions about Kurumatani's stance on preventing activist shareholders from wielding influence.

A Toshiba spokesperson said no decision had been made to reject the buyout plan, adding that its board of directors would discuss the matter once a more detailed proposal was made.

The purchase of Toshiba faces hurdles as it needs to pass screening by the Japanese government for national security reasons. Toshiba's business portfolio includes nuclear power and defense equipment.

Nagayama has said CVC's proposal was "abrupt" and lacked substance, suggesting that careful consideration would be necessary.

When Toshiba's board took up CVC's proposal earlier in the month, Nagayama asked Kurumatani, "Are you the one who wrote this plan?" in a display of strong dissatisfaction, according to a source with knowledge of the situation.

Toshiba, a household name in Japan, could see a bidding war among private equity funds that see it as having long-term growth potential after sweeping restructuring triggered by an accounting scandal in 2015 and the bankruptcy of U.S. nuclear plant subsidiary Westinghouse Electric Co. in 2017. Toshiba sold its chip-making unit but still has a stake in Kioxia Holdings Corp.

In an apparent effort to make it easier for Japanese authorities to give the go-ahead, CVC has been seeking cooperation from the Development Bank of Japan and Japan Investment Corp., a private-public sector fund, sources with knowledge of the matter said, though it's understood neither the DBJ nor Japan Investment is willing to participate.

Other potential bidders include Kohlberg Kravis Roberts & Co. and Canadian investment giant Brookfield Asset Management Inc., according to media reports.

Toshiba returned to the First Section of the Tokyo Stock Exchange in January, more than three years after it was demoted to the lower section as the company's financial health deteriorated.

Activist shareholders invested in Toshiba when it was financially struggling, opening the way for the recent confrontation with Kurumatani, who became chairman and CEO in 2018.

Kurumatani did not attend the news conference held immediately after his resignation was announced on Wednesday. In a statement, he only said he wanted to take some time for himself after turning Toshiba around. Chairman Satoshi Tsunakawa succeeded him as president.

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